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For Want of a Nail

The Case for Increased Agricultural R&D Spending
Philip G. Pardey and Julian M. Alston

This paper examines the benefits of increased agricultural research and development (R&D) spending. In 2008, only 2 percent of total R&D spent on science was directly related to food and agriculture. US public investment in agricultural R&D has proved successful, with benefit-cost ratios around 20:1. A failure to increase publicly funded agricultural R&D will likely have long-term consequences for the sustainability of US agriculture in a competitive global environment and for the natural resources on which it depends.

1) Growth in federal agricultural R&D spending has declined: The pace of investment growth has slowed from 3.63 percent per year (after inflation) during 1950–69, to 1.79 percent during 1970–89, to 0.94 percent during 1990– 2009.

2) Agricultural productivity growth has also slowed over the past decade: Since the early 1990s, agricultural productivity growth in the United States has slowed to an average of less than 1.2 percent per year. The growth rate of public agricultural R&D spending by the world as a whole has slowed, but the slowdown is much more pronounced in high-income countries. Just three developing countries—China, India, and Brazil—accounted for almost 43 percent of the entire developing world’s public agricultural R&D spending in 2000 and have experienced high levels of productivity growth.

3) More private-sector agricultural R&D is going toward food processing: In 2006, 59 percent of the total $4.6 billion in private-sector funding for food and agricultural R&D was related to food processing.

4) R&D spending can be increased with a decrease in farm subsidies: R&D spending could have doubled in 2009 with a 20 percent reduction in farm subsidies or a 3.3 percent reduction in food subsidies to consumers.

5) A significant share of R&D is necessary just to maintain productivity: In 1976, 64.6 percent of funding was spent on maintenance research compared with 56.3 percent in 2009. If R&D were to cease altogether, we would not see a continuation of current yields or costs; productivity would decline and food prices would rise.

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